Teagasc Financial Statements 2017

We are back in public session. Today, we will be dealing with Teagasc's financial statements for 2016 and 2017. We are joined by Professor Gerry Boyle, director, and Mr. Tom Doherty, chief operations officer. The representative from the Department of Agriculture, Food and the Marine is Dr. Kevin Smyth.

I remind members, witnesses and those in the public Gallery to turn off all mobile phones. That means switching them to aeroplane mode. Switching them to silent mode is not sufficient because they can still interfere with the recording system.

I advise the witnesses that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. If a witness is directed by the committee to cease giving evidence in respect of a particular matter and he or she continues to so do, the witness is entitled thereafter only to a qualified privilege in respect of the evidence Witnesses are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise nor make charges against any person or persons or entity, by name or in such a way as to make him, her or it identifiable. Members are reminded of the provisions within Standing Order 186 that the committee shall also refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government or the merits of the objectives of such policies. While we expect witnesses to answer questions put by the committee clearly and with candour, witnesses can and should expect to be treated fairly and with respect and consideration at all times, in accordance with the witness protocol.

We will start by taking the Comptroller and Auditor General's opening statement.

Mr. Seamus McCarthy

The Agriculture and Food Development Authority of Ireland, better known as Teagasc, was established in 1988. Its primary function is to provide education, training, advisory and research services to the agriculture and food industries and to rural communities.

The Teagasc financial statements before the committee this morning relate to 2017. They are consolidated statements incorporating the results of the Teagasc subsidiary Moorepark Technology Limited, in which the authority has a majority shareholding. The financial statements record total income of €183 million. Over three quarters of Teagasc's income is accounted for by direct Oireachtas grants. The bulk of the remainder comprises advisory service and course fee income, research grants and commissions, and trading income from Teagasc's own farming operations, including the sale of livestock.

The authority's expenditure for 2017 totalled €178 million, and is detailed in notes 7 and 8 to the financial statements. As the figure in the presentation indicates, pay, pensions and other staff costs accounted for two thirds of the expenditure. Other expenditure related to Teagasc's operations, including depreciation, amounted to €50 million or 28% of the total. Grants of various kinds accounted for €10.2 million, or 6%. The operating surplus for the year was just over €5 million.

I issued a clear audit opinion in respect of the financial statements for 2017. However, I drew attention to the disclosure in the statement on internal control regarding expenditure in 2017 of €1.35 million where the procurement procedures employed did not comply with public procurement guidelines.

Members may wish to note the presentation with the financial statements of a governance statement and authority members' report. Presentation of a report of this kind is a requirement from 2017 for all State bodies operating under the code of practice for the governance of State bodies issued by the Department of Public Expenditure and Reform. As well as describing the governance structures in place in Teagasc, the governance statement includes additional information about expenditure on consultancy and legal services, travel and subsistence costs incurred, and spending on staff and corporate hospitality.

Professor Gerry Boyle

I welcome this opportunity to present a brief opening statement to the committee. The Teagasc mandate, as set out in the 1988 Agriculture (Research, Training and Advice) Act, comprises three components, namely, "to provide or procure educational, training, and advisory services in agriculture"; "to obtain and make available to the agricultural industry the scientific and practical information in relation to agriculture required by it"; and "to undertake, promote, encourage, assist, co-ordinate, facilitate and review agricultural research and development (including research and development in relation to food processing and the food processing industry)."

In regards to governance, the Teagasc authority is accountable to the Minister for Agriculture, Food and the Marine and is responsible for ensuring good governance through setting strategic objectives and targets and by taking strategic decisions on all key business issues. The day-to-day management, control and direction of Teagasc are the responsibility of the director and the senior management team.

Teagasc fully adheres to the code of practice for the governance of State bodies and adheres to all circulars emanating from the Departments of Agriculture, Food and the Marine and Public Expenditure and Reform. Teagasc's system of internal control is supported by its audit and risk committee, comprising three authority members, one of whom serves as chair, another is the Department of Agriculture, Food and the Marine's representative on the authority and there is also an external member with significant financial and audit expertise. The audit and risk committee is supported by an internal audit function which reports to it. The authority's operations committee provides oversight on the effectiveness and efficiency of all Teagasc's administrative functions.

Teagasc maintains regular contact with the Department of Agriculture Food and the Marine on administrative and programme matters. At the end of each year, a business plan for the year ahead is approved by the authority and a oversight agreement, OA, based on this plan is agreed with the Department. The OA is regularly reviewed by the Department in consultation with Teagasc. Each year, as required under the 1988 Act, Teagasc also submits a proposed annual programme of activities for review to the Department. Teagasc also operates a rigorous performance and evaluation system involving external peer reviews of all of its programme as well as the monitoring and tracking of key performance indicators.

The mission of Teagasc, as adopted by the authority, is to support science-based innovation in the agrifood sector and the wider bioeconomy to underpin profitability, competitiveness and sustainability. The Teagasc authority has adopted four goals. These are to improve the competitiveness of agriculture, food and the wider bioeconomy to encourage diversification of the rural economy and enhance the quality of life in rural areas; to support sustainable farming and the environment; and to enhance organisational capability and deliver value for money.

Teagasc has six operational programmes. These are animal grassland research and innovation; food research; crops, environment and land use; rural economy and development; advisory and extension; and education and training. In addition, Teagasc has a central administration service embracing finance, HR, ICT and corporate service functions. Teagasc is a national organisation with sites distributed throughout every county in the country. It has 51 advisory offices, which is down from 90 following a recent rationalisation programme. It also has four colleges of further education and seven research centres.

In regard to finances, Teagasc is obliged each year to match its expenditure with its income. It is unique as a non-commercial body in having a relatively large proportion of non-grant-in-aid, GIA, income, some €56 million in 2017. This non-GIA income comprises grants awarded to Teagasc as a result of success in competitions for research and advisory funds at national and EU level, advisory and education fees, farm operations, industry levies and the sale of various professional services. In 2017, Teagasc received €125 million grant-in-aid, including €43 million for pensions, to meet its current expenditure needs and a further capital grant of €3.15 million. Turning to capital requirements, in the absence of access to borrowing facilities, Teagasc faces significant challenges in funding its working capital requirements. This issue has become more acute in recent years as Teagasc’s non-grant-in-aid income has increased significantly.

Similarly, in the absence of a borrowing facility, longer-term capital funding for our research and educational infrastructure is even more challenging. Teagasc’s grant-in-aid earmarks a relatively small amount of funding for infrastructural purposes which is only sufficient to partially cover maintenance costs and undertake some minor capital works. More substantial infrastructural needs are funded as the opportunity arises through the sale of assets that are no longer programme priorities, or through once-off special capital grants from Government. Reliance on asset sales as a funding mechanism is not a sustainable basis on which to fund ongoing infrastructural needs. While the availability of special capital grants is welcome, the process results in an episodic funding schedule.

Teagasc received an unqualified audit certificate in 2017, but the Comptroller and Auditor General did draw attention to some procurement issues. Teagasc is making every effort to be as fully compliant as possible in regard to its procurement practices. Significant improvement in procurement procedures has been implemented in recent years through the recruitment of specialist staff and the development of robust systems. It should be noted that procurement in Teagasc is complex due to our diversified activities and the geographical dispersal of our sites. The issues reported in the financial statements were discovered and brought to the attention of the Comptroller and Auditor General by Teagasc.

In the main, the reported matters were due to two factors. The first was quotes being sought from a number of local suppliers rather than advertising through eTenders. We are satisfied that this did not adversely impact value for money, given the number of quotes sought and the type of services procured. The second factor was the extension of existing contracts for services where the requirement was being reviewed, where there were delays in the implementation of the Office of Government Procurement process or where a similar service had been procured from that supplier. While no breaches can be tolerated, it is noted that the breaches amounted to tender values of €1.35 million out of a total expenditure of €42 million, or 3.2%.

I welcome Professor Boyle and his colleagues. I have a number of questions but I might not take 20 minutes as I have to go to another meeting. The operating surplus for last year was reduced by almost €3 million year on year. Will Professor Boyle give the committee an indication of why that is the case? The advisory fees have gone up considerably in the same period.

Professor Gerry Boyle

I thank Deputy Deering. The first point I will explain about the operating surplus is that Teagasc does not aim ever to have a surplus. We are obliged to match expenditure with income. The second point is that attention should be focused on the surplus for the financial year, which is lower down the column on the page Deputy Deering is referring to, under note 11. The surplus declined from €6.152 million to €2.398 million. There is a simple reason for that. We do not expect, normally, to have a surplus, but in recent years we have had significant difficulty in trying to manage cashflow. We sought leave to put in place an overdraft facility but permission was not forthcoming from our parent Department or from the Department of Public Expenditure and Reform. The decision was taken then to try to build up a capital reserve to be able to meet our recurrent capital requirements on a sustainable basis. In 2016, we were able, through prudent management, to generate such a surplus. I want to emphasise that would not be the norm-----

Professor Gerry Boyle

Yes, that is it precisely. We felt that was a prudent thing to do because we were quite concerned about our ability to manage cashflow in a prudent way. The Department did support us in this respect. In 2017, because this is an opportunistic type of activity, the same opportunity did not generate itself because of demands on current expenditure. The €2.398 million surplus is broken down roughly between €1 million from the capital side of our activities - we did not spend as much as we thought we would on capital - and the other €1.83 million from the current budget side. In summary, it is unusual to have any surplus but there is a reason we have a surplus. Whenever we have the opportunity over the next couple of years, we want to build that up to probably a significantly higher sum given the nature of our activities-----

Professor Gerry Boyle

This fund will be ring-fenced and only used as we need it. To be honest, I would far prefer to be able to use a fund like this for long-term capital investment because we have serious infrastructural deficits in the organisation. At the same time, we are being prudent in wanting to ring-fence a fund to ensure we can meet our recurrent capital requirements. An example would be that much of the time when we get income, we incur the costs of those activities before we get paid for them. It can also take a long time to recover moneys on projects where we have spent resources. We have a very clear cashflow issue and that is the basis of the surplus.

Professor Gerry Boyle

The process of determining the advisory fees is that when we are proposing any change in fees, the advisory and education committee of the authority reviews the arguments for fee increases.

They tend to be quite marginal from year to year. The authority committee makes a recommendation to the full authority and if it is adopted by the full authority it has to be approved by the Minister for Agriculture, Food and the Marine. We are going to recover the full cost of our activities because much of our advisory activity is classified as public good activity.

In recent years the Government has put out tenders for the delivery of some large schemes, such as GLAS, which underlines the growth in external income to a significant extent. We competed to provide that service and that generates a large amount of income on top of the charges we impose on farmers.

Professor Gerry Boyle

There are bad debts but they tend to be small. I do not have the percentage but we can supply it to the Deputy. The audit committee makes a determined effort to recover all bad debts, and we only write a debt off when we have reached the end of the road. We wrote off €113,000 in 2017. That is across 12 advisory regions. We have 45,000 clients so, while no write-off is acceptable, in the context of the overall income generated by our advisory fees of close to €12 million it is not an entirely bad figure.

Professor Gerry Boyle

Ms Susan Kearney

We do not have a policy of regular revaluation of our land. We have given careful consideration to it because the assets are stated in the financial statements at historical cost value. If we were to adopt a policy of revaluation we would have to do it on a regular basis and it would be a relatively expensive operation.

Teagasc has properties other than land, which it has disposed of from time to time. I presume there is a database of properties which it is looking to dispose of. Have they been revalued in recent times? If so, how does Teagasc come to the conclusion that it will dispose of a particular property?

Professor Gerry Boyle

Our property disposals typically involve land and when we sell land we engage professional advice to ensure we know the market value and that we get the best value for the State. The process involves various committees of the authority, which then decides whether to proceed. The key issue is to ensure appropriate value is obtained and this has to be sanctioned by the Minister for Agriculture, Food and the Marine. The decision to dispose of any property is not taken lightly and we always ensure any land to be sold is not a programme priority for Teagasc.

Has Teagasc identified any land or property it intends to sell going forward? In 2017, Teagasc made a loss of €192,000 in the disposal of assets and it was over €1 million in the previous year. It is not sustainable to rely on asset disposal to fund infrastructure.

Professor Gerry Boyle

We have identified assets to dispose of. Teagasc undertook a rationalisation programme in the period up to 2012 and 2013 and we identified a number of properties to be sold. These were mainly advisory offices, of which we had 91 in 2010 but have now sold off around 40. The rationalisation plan concluded that we could accommodate all our research requirements at that time at our Ashtown site so the Kinsealy site, which had been used for horticultural research purposes, was earmarked for closure. We migrated all our staff from Kinsealy to Ashtown and we are now in the process of selling the site, though we have not yet commenced the process. We have secured professional advice on how to maximise value to the State.

Professor Gerry Boyle

Yes. We have had an initial valuation, without planning permission, of €12 million. We would like to retain all the proceeds of the sale for investment in our infrastructural requirements, which are many, but that is a matter to be determined by our parent Department and the Department of Public Expenditure and Reform. We certainly hope they will accept the logic of our position, because other than once-off grants we do not have recourse to any funds other than the proceeds of such sales. This would be a very welcome sale but it is, in any event, a couple of years down the road.

Professor Gerry Boyle

In the immediate term we have a requirement to build a new suite of laboratories at Johnstown Castle, to address our environmental research programme and things such as climate change, water quality and so on. There are a number of other projects which we wish to pursue, including the refurbishment and development of our agricultural colleges, which is a major cost that we have to fund out of our own resources. We do not receive any grants from the Department of Education and Skills and it all comes through the agricultural Vote. It is a significant cost from time to time.

Professor Boyle mentioned climate change, an issue which is coming at us at 100 mph. He said he would like to invest the money in laboratories for that purpose but would he say we were playing catch-up at this moment?

Professor Gerry Boyle

I believe that is absolutely not the case in respect of agriculture. I am an ex officio member of the climate change council and I am quite aware of the measures being taken by other sectors. I believe agriculture has been to the fore on the issue, in acknowledging the challenge and in identifying solutions. My colleagues, in Teagasc and in the universities, have identified a number of measures relating to mitigation, sequestration and the replacement of fossil fuels by renewables such as biomass.

We have identified nearly 30 individual measures that, if adopted, could significantly address the likely targets under the EU effort sharing agreement by 2030.

Some people - I would not agree with them - believe climate change is a fallacy. Is there a public relations job to be done by Teagasc, the Department and all farming organisations in order to highlight what has been done? While much has been done in the whole sector, this issue is coming at us at 100 miles an hour. We have targets to meet which we will not meet in the short term but will in the long term. Is there a need for a public relations campaign to be waged by Teagasc to enlighten and inform what has been and can be done?

Professor Gerry Boyle

In this situation, one cannot have enough communication. We are involved on several fronts on environmental enhancement and improvement. For example, there is a huge appreciation in the agricultural sector that concerns over water quality have to be dealt with. The Deputy is correct in suggesting the same appreciation does not extend at this point in time to climate change because the visibility is not there. We have been working closely with Bord Bia trying to generate visibility among the farming community as to the consequences and potential solutions to mitigate climate change.

For example, we have introduced the concept of the carbon navigator which is widely regarded across Europe as being an innovative device which indicates to farmers how normal practices can improve efficiency and the environmental footprint. In other words, there is a win-win, which is positive. Our plan for the next year is to build on that and on the publication, which I mentioned earlier, with regard to mitigation options in order to build a whole campaign around driving sustainability on farms.

We are also discussing with our parent Department where that can be extended in terms of policy. There has to be a suite of incentives for farmers to adopt some of the measures we have identified. For example, there are two clear quick wins. We have suggested a significant mitigation option on farming is to replace calcium ammonium nitrates with stabilised urea which can address nitrates oxide emissions, as well as the problem with ammonia, an important area to which we have been drawing attention. We think that is a wider problem beyond agriculture and is probably not as fully appreciated. The spreading of slurry is a critical mechanism to reduce emissions. We are looking at various technologies such as injection systems, trailing shoes and so on. Farmers will have to be informed and incentives will probably have to be put in place to ensure those technologies are adopted.

We have ambitious targets in the whole agricultural sector with programmes such as Food Wise 2025. How does Professor Boyle believe we can balance those targets with the challenges that climate changes presents?

Professor Gerry Boyle

This is a real challenge. I have gone on record in public that there is an incompatibility between the trajectory for cow numbers and our greenhouse gas obligations by 2030. Teagasc, along with the Department and other bodies researching this area, has identified mitigation and sequestration options. They will not be sufficient to offset the trajectory in terms of cow numbers. That is the reality and has to be faced up to. The Deputy made the point about awareness, the importance of identifying the problem in the first instance and then coming up with solutions. That is a dilemma for the industry.

There is a Greenfield programme site in County Kilkenny which has come in for some criticism recently, rightly or wrongly, for the type of farming model created there. What investment has Teagasc put into it? Who were the different stakeholders involved initially?

Professor Gerry Boyle

This is a partnership between Teagasc and several private entities comprising Glanbia, the Irish Farmers Journal Trust and a private farm family. We have made no investment in the facility. We provide managerial advice on the model to be implemented on the farm. We also supply the services of a Moorepark staff member who liaises with the manager on the site and with the stakeholders in terms of the overall management of the farm.

Professor Gerry Boyle

It is a private company. It has leased the land from the owners. Teagasc has no involvement in that. Our only involvement is primarily that one of our staff members supports the manager on site. We then provide the high level information through our research services to the site.

Professor Gerry Boyle

It was very much designed to enable new entrants into agriculture, particularly into dairy. It was to establish a farm that could be sustainable in economic terms at a relatively low cost. It has been immensely successful in that respect. We have established several discussion groups - this is the role of the Moorepark officers on the farm - of young people who have come into dairying for the first time. They are enabled through the model to put together the investment needed.

We are conscious of the importance of communicating full information on the operation of the farm, the successes and the failures. Most recently, during Storm Emma, there were concerns around several animal deaths. Two cows and six calves died during that storm. We have commissioned a review, carried out by the former Secretary General of the Department of Agriculture, Food and the Marine, along with the other partners in the project. We are awaiting finalisation of that review. Lessons will certainly be learned in terms of the model and managing an extreme event like that into the future.

Professor Gerry Boyle

Professor Gerry Boyle

Up to this year, the farm has been building up significant reserves. It has been useful as a demonstration facility for other farms because it is a full-cost model. For example, all of the labour and land are fully costed. There is no other entity that has that financial data. It is not available in a normal farming situation. The farm was also affected by the drought to a significant degree. There were substantial extra costs incurred this year in particular.

I know it is doing a good job for farmers, being one myself who avails of its services, of which I am very appreciative.

On the death of the animals on the Greenfield programme farm, was it because of the intensiveness of the model or that they were exposed and did not have protection? I know the model is very intensive and there are many experiments going on there.

Professor Gerry Boyle

Professor Gerry Boyle

Yes. It is designed to be a top-class dairy farm, based on minimising investment and production costs.

Along with the other partners, we have commissioned a review which is not yet complete. It would be inappropriate for me to get into what is at this point a draft review, but I note that the episodes that occurred were primarily due to the storm event. It was an extraordinary event in terms of the build-up of snow and drifts over a very short period. Even though the farm had taken preventative measures, they clearly were not sufficient. In the wider context of overall animal health and mortality statistics on the farm, the episodes, while utterly regrettable, are not significant. The overall health status of the animals and the mortality-----

Professor Gerry Boyle

Professor Gerry Boyle

No. Obviously there is housing for pregnant animals, young calves and so on. That is at the heart of the review. We hope there will be lessons from it. One of the reviewers we brought in is from Canada and is familiar with dairy farming under extreme weather conditions. We hope to benefit from the insights presented from that review. I should say that I have a long-standing commitment to present the results of that review to the Committee on Agriculture, Food and the Marine when it is finalised.

Professor Gerry Boyle

Yes. I do not have data on the area utilised for agriculture because there is a lot of forest on those lands around the country. We have six research sites. We farm 175 ha that we own at Moorepark, for example. We also have leased land, which I am not counting in that total. The 1,800 ha is owned land.

Professor Gerry Boyle

Professor Gerry Boyle

We lease land from farmers. For example, the famous Curtins Farm in Moorepark is leased. The land on the agricultural colleges, such as the 158 ha we own at Kildalton college, is primarily used for educational projects and the training of students. However, we have taken the decision in recent years to also locate significant research projects on all of our college farms. For example, we have a major project on the way at Clonakilty agricultural college on the use of clover in rye grass swards which has been generating really interesting results of international significance. On the Kildalton site we have what we call a sustainable farm. It is early days, but our intention there is to establish a farm that meets the full spectrum of demanding sustainability requirements but is commercial. That is a research project. For several years we have had a research programme under way at Ballyhaise college on dairying in the region. That project has established that it is possible to generate significant profits in a more challenging landscape than Moorepark. Our plan has been to have a research programme under way in the colleges.

Given the recent Government directive about semi-State land and the housing crisis, does Teagasc have land or property that would be suitable for sale for housing? I know Teagasc's land is mostly rural. Does Teagasc own land that could be used for social or affordable housing? Has the organisation identified such sites? The Comptroller and Auditor General mentions sites held for resale on page 106 of the report. There is one site each in Limerick, Galway and Cavan and two sites in County Dublin, with a total carrying value of €914,000. I would like to ask about the sites the Comptroller and Auditor General identified.

Professor Gerry Boyle

Professor Gerry Boyle

The other site in Dublin is the Ashtown site in Castleknock. There are about 12 ha there. That is chock-a-block with activity at the moment because we moved all of our activity down the motorway from Kinsealy to Ashtown. It is a hive of activity. It has absolutely top-priority programmes. Three different types of activity are going on there. It is the location for our meat centre. All the meat research that Teagasc does is located in Ashtown. We work very closely with the Grange production research facility on beef. It is also the centre for our horticulture activity. We recently invested in state-of-the-art glasshouses. We also use the site for our education programmes, as an adjunct to our horticulture education facility at the National Botanic Gardens. It is also the location of Meat Technology Ireland. In the last year, with pressures from Brexit and support from the Department and the Minister, we have substantially invested in facilities and equipment for the prepared consumer food sector. This is very much programme priority and every inch of space is absolutely dedicated to top-priority research programmes.

I will move on. I would like to ask Professor Boyle's opinion on the fodder shortage. In August and September there was a fodder shortage of about 30%. Last week, the Minister stated in the Dáil that this had decreased to just 10%. As an advisory body, what is Teagasc's opinion on farmers' position regarding the fodder shortage? Will we have an ongoing problem in the winter like we had last year, due to the bad weather and the drought that followed? I would like a general opinion.

Professor Gerry Boyle

We have carried out two fodder surveys. Teagasc has co-ordinated that. We are members of and co-ordinate the interagency fodder committee established by the Minister to deal with and respond to the fodder situation. We did a survey around June that showed a 30% fodder deficit. I think that is where the Deputy's figure comes from. We carried out a new survey more recently, and there was significant improvement between the first and the second surveys. The first one showed an average deficit of about 30%, though of course there is a range of results. The second survey showed an average deficit of about 12%.

Professor Gerry Boyle

Professor Gerry Boyle

It has. This is our best available information. It is given completely independently. We believe that is the situation and it has improved. In fact, a lot of farmers plan to graze for a lot longer this year if the weather holds up. Having said all of that, we are very conscious of an enormous range. One thing that I found travelling around the country this year is a huge variation on this very small island between the western seaboard, from Clare right up to Donegal - I made a trip along that line - and the south-east of the country, particularly Wexford, parts of Kilkenny and parts of my own county of Tipperary.

The challenge is to help farmers to manage a difficult situation that some will find themselves in over the winter. We have clear sets of protocols in place to help farmers stretch the fodder in the drying off period. We believe that with careful and proper management farmers can get through the winter. That is our view.

I am quite concerned that this is unlikely to be a once-off event because one of the predictions of climate change is that these kinds of episodes will be more frequent and when they occur they will be more severe. We are sitting down with our research colleagues and asking how we need to adjust the recommendations around the farm model, which is most resilient, given the expectation that these events will be more frequent.

The push is on in Food Harvest 2020 and Food Wise 2025 to increase production. Are we pushing farmers to the limits, especially in the dairy industry where we have too much stock and not enough capacity? This applies in particular in the context on climate change, the weather we are having now and the changes in the seasons. Are we pushing too much without thinking about the consequences? It is alright having 300 or 400 cows but is Teagasc worried that farmers will have enough fodder to ensure viability?

Professor Gerry Boyle

One fact should be pointed out. There are fewer cows - less livestock - in the country now than there were in the late 1990s. That is a reality. Clearly what has happened is that expansion has taken place over a very short period of time, particularly in the dairy farms, in certain areas. Sometimes Teagasc is criticised unfairly - and the Deputy might say that I would say that - for advocating an unsustainable expansion strategy. We did nothing of the kind. Time and again, we told farmers to look to their own farm gate first and improve their efficiency before increasing their cow numbers. That message does not always get across, especially in a rapidly changing situation where farmers who may have been used to providing fodder for 50, 60 or 70 cows took a chance and doubled their cows over a couple of years. We say to these farmers that it is time to pull back and look at improving their grassland. The Deputy will be aware that we still have the situation where the average utilisation of grass on dairy farms is only 7 tonnes per ha. With PastureBase Ireland we can track grass growth all over the country so we know that capacity is double that figure.

Professor Gerry Boyle

No, but the issue is whether farmers had been up to capacity before the drought and before this year in producing to what is possible. We can double grass production on most farms and PastureBase Ireland has demonstrated that. We have a Grass 10 programme, which is a four-year programme supported by the Minister and a number of other private companies are involved. We are focusing all our efforts around efficiency but if a farmer, clearly, is not capable of generating the efficiencies in grass production for the stock on his or her farm, that is not a sustainable position. That is the clear message we are trying to send out. I admit it can be difficult at times to get that message across.

With regard the decline of the suckler herd and its viability, especially suckler-to-beef, will Professor Boyle comment on that decline and getting young farmers to continue raising suckler animals and making it a viable proposition? The amount that is realised from a suckler-to-beef herd for a livelihood makes it hard to survive. What research is done on this?

Professor Gerry Boyle

The Deputy is absolutely right. Without the basic payment scheme, farmers could not survive on the income levels from suckler farming. According to the Teagasc national farm survey, the typical family income from a suckler farm is about €10,000. That mainly involves the basic payment to the farmer. Clearly there is a viability issue. When one analyses the problem it is not difficult to explain why it is at that level. There is quite a spread of people engaged in suckler farming. Very few of them would be full-time, commercial type farmers. Many of these farmers are older people who perhaps are stepping down from a career in dairy farming or the fattening of animals and they like to be involved in farming. A lot of them are part-time farmers whose livelihood is not dependent on the income from their suckler enterprise. It is, therefore, a very challenging area. There is no escaping the fact that this has not happened today or yesterday. I am in this business a fair long time now at this stage, and we have always had this problem within the suckler industry. The fattening sector is a little better but it is highly variable. The suckler industry, however, has a huge difficulty.

Teagasc tries to emphasise that we can have a win-win pathway for dry stock farmers from dairy, but it will take a while for a mindset change. There are huge opportunities, for example, for dry stock farmers who are expert at managing cattle and herding to rear young animals. There is already a small number of farmers engaging in that and they are doing very well. We also believe there are opportunities for farmers to fatten animals coming off the dairy herd, which was much more common prior to the dairy quota. There are far fewer animals coming off the dairy herd, for example, beef animals, than we had before the dairy quota. There are opportunities there and rather than this false antagonism between dairy and the rest, we should be trying to see how income earning opportunities can be complemented as dairying is moving forward.

What is Professor Boyle's general opinion on the beef data and genomics programme? Those rearing continental breeds, especially the Charolais breeders, say the genomics scheme is destroying the animal because people are choosing small lean animals of between 22 months and 24 months for beef as opposed to the big, honest animals of years ago. This is especially the case with continental breeds. What is Professor Boyle's general opinion of the scheme and the research on it?

Professor Gerry Boyle

It will not surprise the Deputy to hear me saying this but I believe it is a really important scheme. Alongside the improvements in efficiencies of grassland use, the second biggest area where we have made substantial advances in the agriculture sector has been in the breeding of animals. We can see the huge benefits in the dairy industry by promoting the economic breeding index, EBI. The difficulty when it comes to the beef animals is that the group is much more heterogeneous in terms of types of breeds and so on. The principle, however, is the same. The beef data and genomics scheme provides us with the hard information to enable us to improve the efficiency of the breeding indices. I am sure the Deputy is aware that breeding is the one area where there is most discussion, and it is very often emotional and, at times, virulent. The science is very clear. The breeding index is based on science. It is not based on the look of an animal. While it will take longer, the beef data and genomics scheme is the pathway towards improving the quality of the beef herd.

I want to move on to Brexit, which is the white elephant in the room. Does Professor Boyle believe that we are ready for Brexit? We do not know what will happen with regard to Brexit but how is Ireland's agriculture community prepared? Brexit will have a bigger effect on the agriculture community than on any other sector in Ireland. Are we prepared for it or will there be serious consequences arising from whatever outcome emerges from Brexit?

Professor Gerry Boyle

Obviously, like everybody in the country, nobody knows what exactly the format of Brexit will be. With regard to Teagasc's responsibilities, we work very closely with the Department and with Bord Bia in particular. Our responsibility relates to the innovation agenda. We have a capability in our economic division and we also have a responsibility around analysing the economic impacts of Brexit as it affects the dairy sector. Teagasc was the first to produce a comprehensive analysis two years ago on the impact of the so-called hard Brexit option. We are all aware of the devastating consequences it would have.

In terms of actions to combat Brexit, we have been focusing on identifying opportunities for innovation. If there is to be a silver lining in Brexit, it will be the opportunities presented and the drive to market diversification, which is positive. Most of the markets being identified are outside of Europe.

Professor Gerry Boyle

I am not fully involved in this area but I am aware that companies are actively engaged in securing their UK markets and in entrenching customer loyalty therein. As members will be aware, a number of companies are building and expanding facilities in the UK. We are interested in the potential that lies in Asian markets, particularly south east Asia. This will require innovation. The example I always give is the outlook for cheddar. We are hugely dependent on the UK market in this regard in that 70% of our cheddar exports are to the UK. The Irish and the British like cheddar but the continentals do not. While other cheeses can be produced on a cheddar platform, we are working with a number of companies to identify a cheese that could be built off a cheddar platform which would be of interest to the Chinese consumer. That is a long haul. Hopefully, we will have a sufficiently long transition period to enable us to bring forward these new products.

The farmer is in a more difficult position in that he or she cannot relocate the farm to the UK. Insofar as we can be of assistance, we are advising farmers to promote, develop and implement efficiency on their farms.

Professor Gerry Boyle

Farm safety is the remit of our advisory service. We do a significant volume of research on the causes of farm accidents, focusing not only on mortality rates but farmer health in general. We have a specialist adviser dedicated to farm safety. This person is responsible for training Teagasc advisers throughout the country, of which we have approximately 280, on the latest thinking in regard to reducing accidents on farms. This person also ensures farm safety is on the agenda of all discussion groups on a regular basis. We are in the process of recruiting a second specialist because we think the workload has become too onerous for one specialist. This person also works in collaboration with our frontline advisers. Everything we do on farm safety is in partnership with the Health and Safety Authority, HSA. We work hand in glove with the HSA to deliver our annual farm safety course. Farmers sign up for this course. Along with the HSA, we have identified that awareness is one thing but getting farmers to do the things they know they should be doing is the challenge. For this reason, we have undertaken research to identify the underlying behaviour that causes a man or woman to do something on the farm that he or she knows is hazardous.

There is particular concern at the moment with regard to elderly farmers. Unfortunately, a lot of the tragic accidents in recent times involved elderly farmers, some of them aged 80 plus, overturned tractors and livestock. The reason for this is, we think, pretty obvious. Many young people are taking up jobs off-farm and leaving management of the farm to their elderly relatives. This is an area on which we intend to increase our focus. We also work closely with the Department and other bodies such as the FBD Trust, which has a major farm safety programme, and the committees within the farm organisations. We have been talking about this issue for a long time. Unfortunately, the statistics are still moving in the wrong direction. I do not know the answer.

On the increase of €403,000 in travel and subsistence which the Comptroller and Auditor General referenced in his opening remarks, what was the reason for that increase? Are Teagasc personnel taking trips abroad and so on? I ask Professor Boyle to explain the reason for the increase.

Professor Gerry Boyle

Yes, but it is an 8% increase. First, there was an improvement in subsistence rates, which had been fixed for a number of years, and this accounts for a significant part of the increase. Second, we have additional staff. All of our travel and subsistence is driven by activity levels on farms. Owing to the fodder situation, we have been engaging in more on-farm visits, which gives rise to additional expenses. While we have 45,000 clients, when it comes to fodder advice we give that to non-clients as well, which is another additional cost.

Professor Gerry Boyle

In my own case, I was recently on a visit to Colombia at the invitation of the Department of Foreign Affairs and Trade. On foot of the President's visit there last year, it was felt that Teagasc might be able to advise on how farmers could be helped to transition from the FARC-dominated violence in some of the regions. Many of the other trips are directly related to research. Teagasc is involved in research all over the world, but substantially in Europe. We are also involved in joint research projects. For example, we might win a project from the European Union in respect of which there would be partners in other countries and we would have to meet up them, or meet in Brussels. A lot of our activity is increasingly international, which is another factor in terms of cost. I assure the Deputy that every item of expenditure is rigorously assessed. When an increase arises, the audit committee reviews the reasons for it.

I welcome the witnesses. This is an interesting meeting. I agree that there is huge diversity in the country. I have just returned from north Mayo where I attended an all-day Irish committee. People there feel they are forgotten but I will come back to that in terms of the rural programme.

Professor Gerry Boyle

The men do, I think, in this case. No, I take that back. I will leave it for the Minister. I just highlight it because we had discussions earlier, though not today, about this in the context of value for money. Gender balance will clearly bring more value for money. There are many studies about that. I will leave that.

With regard to governance, I congratulate the witnesses on a clean audit, which is good. Is the audit and risk committee established and sitting?

Professor Gerry Boyle

That is what I want to clarify with Professor Boyle now. Everything looks good on paper. The committee meets the audit and risk committee. I saw a comment that the chairperson of the board has set up internal audit controls. When were they set up? Professor Boyle did not give a date.

Professor Gerry Boyle

Page 73 indicates Teagasc has an audit and risk committee, which met four times, and that it has also established an internal audit function, which is adequately resourced and conducts an agreed programme of work. That caught my eye. It says it has established it. When was it established?

Professor Gerry Boyle

I would like to believe Professor Boyle but I prefer to see it on paper. Page 47 refers to the Teagasc national farm survey. I thank Professor Boyle for it. It contains interesting information. Is 84,599 the total number of farms?

Professor Gerry Boyle

Professor Gerry Boyle

I see a huge range. Some 35% of farms earned less than €10,000. Will Professor Boyle explain the regional analysis for me on page 47, tying it back to north Mayo? I have a difficulty with the colour coding about farm viability. It indicates that 30% of farms are vulnerable, 43% are viable and 27% are sustainable.

Professor Gerry Boyle

We have particular definitions. Viable farms are farms that generate sufficient income from their farming activity to keep going. Sustainable farms, in addition to commercial income and the basic payment scheme, also take into account whether the family has an off-farm job, for example.

Professor Gerry Boyle

We would argue that they are sustainable. The vulnerable are the people who fall into the final category. They do not have an off-farm job and are typically elderly. They might have a low income from their farming activity.

I will go through Teagasc's mission statement regarding the rural economy and development. What was the purpose in drawing attention to the fact that Teagasc cannot borrow? Is the organisation not allowed to go into an overdraft and not allowed to borrow? I do not know why I received two opening statements.

Professor Gerry Boyle

That is very good. It was very helpful. The last goal in that one "to enhance organisational ability" - is especially relevant to today's proceedings. Does Professor Boyle believe that Teagasc should be able to borrow money? Is that his purpose in raising it today? If so, what changes have to be made?

Professor Gerry Boyle

I just wanted to clarify that. I was in the west of Ireland all day on Monday. It was a tale of neglect. We met from 9.30 a.m. to 7.30 p.m. with various groups and co-operatives. Their words were that they feel they are forgotten.

Teagasc's documents are good. A major point in them is to encourage diversification of the rural economy and enhance the quality of life in rural areas. Will Professor Boyle zone in on how he does that on a fair and equitable basis?

Professor Gerry Boyle

North Mayo is not my area and I am not interested in votes. The people there feel they are forgotten. I looked at Teagasc's map. There is no advisory centre in north Mayo. I can pick west Clare or areas in Connemara. I was trying not to be parochial. How does Teagasc work that out as fulfilling its objective with regard to rural development?

Professor Gerry Boyle

My own background is in rural development. That was where I did most of my earlier research work. We do not operate on a regional basis. We do not have a plan for each county with regard to activities.

Professor Gerry Boyle

It is through our series of programmes. The most important driver of rural development, in our view, is having viable family farms. That filters down into the rural community, if we can establish solid income-earning farms. That is the first requirement. That part of the world is similar to where I live. I live in a relatively remote and challenging area. We would emphasise the work that we do on sheep production there. We have an active programme under way involving both research at our site in Athenry, which we try to promulgate the messages from, and what we call a better sheep programme, an advisory programme which involves selecting a number of farms around the country that can demonstrate how commercial sheep production can be enhanced. Similarly, with beef, I committed to establishing a beef demonstration farm in the west. We have located one in Athenry for a number of years. That demonstrates to farmers in those regions how they can improve their income-earning activity. On top of that, a big part of this programme relates to succession planning and assisting farmers in moving the farm from one generation to the next.

Can I stop Professor Boyle there? A better way for me to deal with this may be to pursue it afterwards and talk to the Teagasc officials because I will run out of time. I have not used up my time but I am conscious that two more speakers are due to contribute.

The perception on the ground from people in some rural areas is that they are being forgotten, and I wonder whether Teagasc could take a proactive approach towards that. I may come back to that because I want to deal with a number of practical things along with climate change. I am looking at the mitigation plan and I am heartened by what Professor Boyle said about the trajectory of dairy farming being contradictory to the aims that we need to meet under climate change. Is that correct?

Professor Gerry Boyle

On the mitigation plan, we fought a long battle to get this legislation and we are clearly not meeting our targets under climate change legislation generally. Has a team been set up in Teagasc on climate change to monitor the targets set out in the mitigation plan? I looked at Teagasc's annual statement and Brexit got two pages. Brexit is very important but it has opportunities associated with it as well as risks. We are in serious trouble with climate change, however, and there is only half of a page on it in Teagasc's report. Will Professor Boyle outline for me what actions Teagasc is taking under the mitigation plan?

Professor Gerry Boyle

We have a research team and a knowledge transfer team dedicated to sustainability, which includes carbon, water and biodiversity. We also have two large internal working groups drawn from all over the organisation, one on climate change and the other on water. The climate change group would have produced this report that I referred to in response to Deputy Deering, the marginal abatement cost curve, MACC, report - it is a bit of a mouthful - and that is on our website. That is the culmination of the most recent analysis and reflection on climate change.

Teagasc is the lead authority for a number of the actions under the mitigation plan, so if I look this time next year in the annual statements, will I be able to see a report from Teagasc saying it has met its target, it has not met its target, it is on course to reach its targets or it is not on course to reach them? Will we see that kind of detail?

Professor Gerry Boyle

I will definitely ensure that there is more material on climate change to reflect what we are doing. As I said, this MACC report is the culmination of all of the work we have been doing in recent years.

Professor Gerry Boyle

I would be happier with accountability. I may have picked him up wrong but Professor Boyle said earlier that climate change is not visible. It is very visible. We see it practically every day. Plans have been set with clear objectives and I would like to see Teagasc, as the lead authority, saying what targets it has met, what targets it has not met and explaining the reasons. There is a need for that.

Professor Gerry Boyle

That is a fair point. There is one area where that is the case. Under Food Harvest 2020 and Food Wise 2025, there is an implementation committee chaired by the Minister which meets every six weeks or so. All of the actions and achievements are clearly set out there. What the Deputy is referring to is done in the context of those meetings.

To look at some practical things, on page 94 of the accounts, I wish to examine the financial charges. If the other speakers are going to look at these details, I will stop and let them do so. There was a big jump between 2016 and 2017 in financial charges. It went from €95,000 up to €439,000. Will the witnesses clarify those financial charges for me?

Ms Susan Kearney

I am not sure exactly what they are but what I can say on financial charges is that our charges have increased because whereas we would have earned some deposit interest from our funds which we had in the bank, that is now becoming more difficult because the banks operate-----

I ask the Chair that we note that because there is a significant difference. On the grants to private colleges on note 28 which is on page 94 as well, will the witnesses explain that to me? There are three colleges, one of which is in my county although Mountbellew is not in my area. Will the witnesses explain the rationale behind that?

Professor Gerry Boyle

There are three colleges. There is Gurteen College, the Salesians run the Salesian Agricultural College in Pallaskenry, and the Franciscans run the Mountbellew Agricultural College. They provide educational courses on behalf of Teagasc in their communities and therefore Teagasc is required to subvent a substantial number of the staff at those colleges. We also second staff there who are on our payroll, but that is a separate matter. Additionally, we are required to assist in the maintenance of those facilities insofar as we can because the entities in question do not have the resources. We supply a small amount of funding every year to help with basic maintenance. These are a very important resource to Teagasc in delivering education throughout the country-----

Professor Gerry Boyle

We have a service level agreement with all of the colleges, for example, and that is the main mechanism through which both the audit committee in Teagasc and the Teagasc authority are satisfied that governance is appropriate because we try to make sure that they are run on the same basis as the overall Teagasc programmes.

Professor Boyle was asked a question earlier about building up capital reserves and Teagasc sold assets in 2016. Going forward, how sustainable is it to sell assets to fund daily operations? He said that "this fund will be ring-fenced and only used as we need it". That seems to me to be contradictory so perhaps Professor Boyle might clarify what he meant by that.

On the wage bill where two thirds of the budget goes on pay and pensions, I understand that it is not the same model as any business but could someone outline how this compares internationally, perhaps with the United Kingdom equivalent? Is it normal to have two thirds of the total spend going on pensions and wages?

On the 18,000 ha of land owned by Teagasc, will someone tell me what percentage of that is in forestry? Is that managed by Coillte or Teagasc?

One of the speakers asked about who decided what assets to sell. We did not get an answer on that. We were talking about the Kinsealy site. Who prioritised what lands should be disposed of in that rationalisation programme and is there a list of those assets anywhere?

On the fodder crisis, in relation to which we have had a number of incidents in the past year, many of the EU directives refer to farming by calendar. During the summer at the start of the good weather in July, in areas of Ireland such as the west and the midlands, many farmers wanted to cut hay early. As it turned out the weather stayed good longer than anticipated and it all worked out well in the end. Will Professor Boyle give his view on the wisdom of farming by calendar while on the other hand speaking about erratic climate incidents? It does not make sense to me that on the one hand there are rigid timeframes for cutting silage or hay or spreading slurry and then on the other hand to say that weather changes and it is unlikely to be a one-off, as one of the witnesses said earlier. If we look to the future of farming, that incident caused a lot of stress to farmers over the summer months because they were worrying about the winter ahead of their animals.

Is there anything the professor can suggest that we can do to mitigate some of that concern and worry?

The professor said - maybe I misinterpreted him - that most farms could double their grass output, which would obviously offset a fodder incident. Could he give us some examples of how he is getting down to the grassroots farmers? I am sure it is like anything in that it is probably those who need it the most do not engage in the process. Could the professor speak to that?

On the six research facilities, I would imagine that these facilities do a lot of work with disease control and testing. Do these facilities do testing for other countries? What I am getting at here is how prepared those research facilities are for Brexit. Can Professor Boyle elaborate on the cross-Border and UK relationships in this respect?

Professor Gerry Boyle

I will clarify our attempts and determination in recent years to build up a small capital reserve. This is for managing cashflow. We do not spend these resources on current expenditure. It is simply to manage the gap between the timing of doing the work and getting the income in. That is the problem we have. A company in this situation would normally have overdraft facilities. We do not have overdraft facilities.

Professor Gerry Boyle

We would prefer to be using these resources for longer-term capital requirements, but at the same time we have to prudent in managing cashflow. At present, this is the only way we see of doing that.

As to the question on pay and pensions, I do not have the comparable figure for international organisations, but my strong view would be, from my knowledge of these organisations, that we are very similar. A research organisation is people-heavy, so to speak. All our research staff would be at PhD level, so there would tend to be on higher grade salaries relative to the rest of the public sector. I do not have the data at present, but bodies like Institut National de la Recherche Agronomique, INRA, or Scotland's Rural College, SRUC, Rothamsted in the UK or any of these bodies would have a very similar structure.

On the forestry area, we do not have that information, but I will get that for the committee. We have forests on a lot of our sites. In Moorepark, we have a small forest area around the periphery on the Dungarvan-Lismore Road, and significant forestry in Oak Park. The Deputy is probably aware that a number of years ago the Teagasc authority, with the consent of the Government, handed over a forest and lake area for recreational purposes to the people of Carlow. There is about 50 ha involved in that, but we also have forest on site. We have forest in Ballyhaise and in Johnstown Castle. We conduct a certain amount of research on those activities. We can extract that figure for the Deputy, by site.

On the question of who decides to sell the assets, the process is well set out. During the rationalisation programme that issue obviously came to a head. The management proposed a series of criteria by which assets would be sold. We were dealing with a particular challenging period in the financial history of the country, so there was an absolute necessity to rationalise, which was the context. Management proposed a series of criteria on which, for example, an advisory office would be closed. As one might expect, that included the usage of the office the farmers in the hinterland and the state and age of the office and so on. Then, the authority adopted these criteria, following consultation, and we came forward with a list of properties that were deemed suitable to sell. The authority decided en bloc and stuck with that decision. Given the number of offices we have around the country, it is a very difficult thing to sell even one office. By having a set of criteria, we managed to get buy-in for the entire suite of rationalisation, including the sale of the Kinsealy offices. That was the basis and it had to be approved subsequently by the Ministers.

The Deputy raised a very difficult question on farming by calendar. The popular view among some farmers is that we should move to farming by calendar. One might think that is the sensible way to go. My colleagues, when they have looked at this, found that it can give rise to unexpected implications. It is not as straightforward as it might seem. I believe that the current system, while it has disadvantages, is useful. This year is a good example, where the Minister has been able to exercise flexibility in how it is implemented. We have the best of both worlds. One thing that is very important here is there is at least certainty with the current system. People know exactly on what day they have to cease spreading slurry and what day they can commence. That is useful for a lot of people. If there is a crisis situation, where that does not make sense, one needs the flexibility and, by and large, it has been demonstrated. There a number of ways one could view that issue. I do not think it is entirely straightforward.

On the point I made on the potential to grow grass, it is a massive challenge. It is one our key performance indicators, KPIs, and we track that each year. We have a trend now. While there has been growth in grass utilisation, it has not been as we would have liked. It has grown over the last three or four years, averaging out the extremes. It is a huge puzzle because our research colleagues estimate that every extra tonne of grass utilised is worth about €180 per hectare for a dairy farmer and about €105 for a beef farmer. What are we doing about it?

We have a number of programmes in place in recent years. We have invested a lot in developing a whole methodology for measuring grass. On the front of our report, there is a photograph of colleagues engaged in that activity. We have set up a programme called PastureBase Ireland. This allows us to track grass growth performance right around of the country. With that information, we can benchmark. If one is a farmer in west Tipperary and is interested in what one's colleagues in east Limerick are doing, a comparison can be made with their performance. Benchmarking has proved to be a useful tool to improve performance. That data is published regularly and is very much like a weather map and has been very useful in the last year, in particular, in tracking the impact of the fodder situation, because grass growth diminished particularly during the drought. That is one tool. This is an example of precision agriculture at work in the dairy sector, in particular, although the technology can be used elsewhere. We can learn a huge amount from that information. It is unique worldwide and we are talking to the New Zealanders and the Australians about using that technology. Hopefully, they will buy it off us.

We also have a programme in place to promote the utilisation of grass more aggressively. It is called Grass 10 and we are in the second year of a four year programme. The ten stand for a target of ten tonnes, utilised grass per hectare, which is a little less ambitious than what I said, but it is considered to be a reasonable target. Ten also stands for the number of grazings that we would advocate farmers to conduct during the season, because there is a high correlation between grazings and production and utilisation. That is strongly supported by the Department and is also supported by a number of companies.

The biggest challenge we face as an organisation is to persuade farmers to adopt these kinds of technologies with regard to grass in particular. I will give the committee an example. As I said, there are two main technologies that we have been promoting within Teagasc. One is breeding technology. There has been huge success in this area as we have been working with the Irish Cattle Breeding Federation, ICBF, and the artificial insemination companies. The adoption of the economic breeding index, EBI, has been very successful, for example. Grassland faces a massive challenge and we have not yet cracked how we can encourage farmers to make the transition to what is clearly in their interests and what is also very important from an environmental point of view.

On the Deputy's final question in respect of disease control, we do not have responsibility in that area. We do have responsibility in respect one dimension or aspect, that of food safety. We do a lot of research around food safety from our Ashtown site, and we are also the national laboratory for the analysis of residues in meat. We liaise with the Department regularly in regard to that area. As far as the general economic diseases are concerned, we work very closely with Animal Health Ireland. That is where we feature. We also work closely with the Department in that area. We have joint programmes under way and we subvent or provide a contribution to the work of Animal Health Ireland to enable it to recruit a technical officer.

I thank the Cathaoirleach. I thank the witnesses for their attendance. I have a few brief questions. First, I am not impressed that we could not get a detailed explanation for the financial charges in the accounts when we have the head of finance and the chief operations officer before us. An increase of 362% is substantial. We should be able to detail that in the accounts. That disappoints me. On Teagasc's investment strategy, a part of its model involves doing farm works and advising farmers in organic practices. Is that correct?

Professor Gerry Boyle

It is a small part. I was wondering about how that circle is squared. I see Teagasc has investments in private companies. It is an ordinary shareholder in Glanbia, Kerry Group and Lakeland as part of its business model. Their business models involve selling fertilisers. Another key part is to sell animal remedies etc. How does Professor Boyle safeguard his organisation in promoting organic farming when it, in theory, benefits from share dividends and investments in private companies, part of whose business model contradicts organic farming?

Professor Gerry Boyle

To be clear, the reason we have those investments is that we supply milk from several farms around the country. We automatically receive shares on foot of that. It is not that we go out and actively seek to invest in these companies. It is something-----

Professor Gerry Boyle

That is a very good point. To add to and complement that point, we have a number of what we call joint programmes with virtually all the dairy co-ops in the country. We jointly agree a programme of advisory activity. We pride ourselves on our independence. In the contracts we draw up with all of those co-ops, and it arises specifically and directly in the case of what we call the joint programmes, we only agree to a programme of activity which absolutely does not compromise our independence. Again, the process goes through the internal committee, the advisory and research committee of the organisation.

Professor Gerry Boyle

I want to be very clear about this. In no way does that compromise our independence. I have given the Deputy the example of a situation where, separate to this matter, we have these joint programmes in which we draw up a specific contract with the same co-ops. These contracts might have regard to improvement in protein on farms, reducing carbon footprint, or whatever else it might be. The Deputy is right. It is a challenging issue. It is very challenging. It is something we repeatedly discuss at the full authority level. The question always comes back to me being asked by the chairman or members of the authority whether I am absolutely sure that Teagasc's independence is not compromised.

In terms of Teagasc's livestock, from the holdings listed in the accounts, I note that its stock increased by more than 20% but that the mortality rate of livestock and the value thereof increased by 73%. There seems to have been a significant increase in the number of stock that died on the holdings. Is there any reason for that?

Professor Gerry Boyle

We can provide detailed mortality figures by farm. As I say, we have several farms around the country. We certainly perform exceptionally well in terms of mortality rates. We have to as an organisation.

It is a big increase however. Teagasc's stock increased by approximately 24.5% but the mortality rate seems to be creeping up. It is up at 4% of total stock now. It is a little bit disproportionate in terms of the value. Is there any detailed reason for that?

Professor Gerry Boyle

I am not aware of any. I would consider that a significant change. Livestock values went up dramatically in that particular year because of the market situation. This was natural enough as it was a very good year for dairy and so on. The mortality figure, however-----

I would imagine breeding stock is held at a reduced value for accounting purposes, so one would imagine that values should not impact on that figure. Neither should breeding new stock in because it would not have hit the marketplace yet.

Professor Gerry Boyle

Ms Susan Kearney

We value the stock at market value as set out in our market policy. At the bottom of page 89, under the heading "2.11 Inventory", it states:

Livestock and own farm produce are valued at the fair value model. Fair value is determined on the basis that animals are sold on the open market. Gains and losses, which arise from these valuations, are reflected in full in operational income.

That does not explain what happened. I can move on. The witnesses said Teagasc has service level agreements with private third level colleges for any moneys paid. On page 78 of the annual report, €175,000 for tax advice is mentioned. What is the nature of that advice?

Professor Gerry Boyle

Ms Susan Kearney

We avail of the services of a tax expert to get advice on a range of tax matters, including VAT compliance, issues around sales of properties, and issues around the various types of activities in which we are involved. We are involved in a range of activities which have different VAT statuses. Our research activities and the advisory services we provide to farmers, as compared with the advisory services we provide to the Department of Agriculture, Food and the Marine, have different statuses. Tax compliance is a very high priority in Teagasc so we avail of expert advice to ensure that we maintain compliance. We would also take other financial advice from time to time. That figure would not be entirely for tax advice, but tax would be a main component of it.

Ms Susan Kearney

The €345,000 includes €19,000 for consultancy on Moodle, which is an educational tool in college, some work done by an external agency on means-testing student grants, an evaluation of our library service, and payments made to UCD and UCC for expertise of which we availed. There was also spend on consultants associated with the project in Johnstown Castle to develop a tourism centre. The castle was formerly used for research but it is not appropriate for that use. Some of the spend was also on organising international conferences and other things. The amount includes a range of issues.

Professor Gerry Boyle

The highest overtime payment was €23,000 to one individual. The details are in note 9 on page 96. How is overtime recorded? Is there a computerised system? Does Teagasc consider this amount significant?

Professor Gerry Boyle

I will proceed with a few questions. The vote in the Dáil is on but I will carry on. Committee members have put their questions and I will ask a few more to complete the process.

Deputy Aylward touched on the issue of fatalities. Teagasc provides agricultural advice and the farmers are its clients. I have read the report. Health and safety is mentioned on page 51, and I know Dr. Jim Phelan has been active in this area, but I do not get a feel from the report that it is a significant priority for Teagasc. What I mean by this is we know it is a priority but it is not an adequate priority. On page 51, it states that in 2017 a total of 24 people died in accidents on Irish farms, which was an increase of three on the 2016 number. To date this year, I believe there have been 16 or 17 farm deaths. The very next sentence of the report states that Teagasc works with a number of partners to promote health and safety among rural stakeholders. In the first paragraph on this issue Teagasc outsources much of the issue. Even though everyone is concerned about this, I get the feeling no one has ownership when it comes to dealing with the problem. It is a health and safety issue. If there is a farm death, the Health and Safety Authority conducts the investigation, not Teagasc.

Professor Gerry Boyle

Even though Teagasc is the body that deals with farmers on an ongoing basis, it is the Health and Safety Authority that is responsible for health and safety and investigating farm accidents where there are deaths. I heard a debate this week in the Dáil from which I understand that many agencies are involved in health and safety. Various Departments can have a stake in health and safety issues, and I am sure the Department of Agriculture, Food and the Marine has a role. Teagasc has a role, as does the Health and Safety Authority. I get the feeling that no one is taking full ownership of the issue. I would have hoped it was Teagasc that did so. I know that when something goes wrong, we have a statutory body to investigate it.

This point has been touched on a little and I ask Professor Boyle to give us a bit more information on the age profile of those involved in accidents. All of us who live in rural Ireland have come across the situation of an old man out on his own trying to do what he used to do and do the work of three people. He is not able to do it and should not be doing it. We also have five year old children running around behind tractors. All of these accidents are tragic. Will Professor Boyle give us an age breakdown of all of the deaths?

Many younger people now work off the farms. We are all talking about the situation this creates but we are not doing much about it. A few years ago, I used to meet farmers who would tell me they had never been as well off as they were in the farm retirement scheme. They had never had as much money in their working lives. Many of those farms were vulnerable and not viable. Now I meet farmers in their 70s who tell me they are working harder than they ever did because their sons are trying to hold down a day job. We have 70 year old farmers out on their own with big machines and big tough animals. I feel there is a growing risk. It is a reflection of where we are in rural Ireland at present. Will Professor Boyle also give us details on how many people involved in accidents were farming on their own at the time? We have all heard of tragic accidents where a lot of time had elapsed before someone spotted there was a problem.

I am trying to spur on Teagasc to do more in this area. This is where I am coming from. I do not get it. Teagasc has trained its staff through events it has run. The staff it sends to farms have had training. Professor Boyle has told us the Teagasc national safety conference took place in Clare last November. How many farmers attend these events? Teagasc's staff and consultants, the consultants who do reports for farmers and representatives from some farmers' organisations attend. We feel bad when farm accidents happen and they are the biggest cause of workplace fatalities in Ireland. This should not be the case. Industry has been forced to take quite a step up and I do not think farmers have. I ask Professor Boyle to reflect, come back and give us a bit more information. No one is specifically responsible. This is a plea from rural Ireland to help. Professor Boyle knows all about this, but I would like a greater emphasis on it.

With regard to Teagasc's financial statements, I always ask a basic question when I do not understand something. If I do not understand something, I am quite sure I am not alone in that regard. The Teagasc representatives understand what it means in the financial statements. The financial statements contain the heading "knowledge transfer", which seems to be a very big source of income and expenditure. It is a significant part of the accounts. Teagasc's income also includes operations income, research income and Oireachtas grants, but knowledge transfer is a big part of it. Will Professor Boyle explain to the people watching this, who are not familiar with Teagasc financial statements, what this is all about? What does the heading mean?

Professor Gerry Boyle

The Chairman has raised an interesting point. We are very used to the terminology. Knowledge transfer activity in Teagasc embraces two divisions. Our advisory activity, whereby we have offices throughout the country, is one branch.

We have a dedicated head of that activity. We also have 284 front-line advisers in the field who are backed up by an administrative support team and so on. The other branch covers our educational activity. It comprises the four Teagasc colleges and all of their teachers, technicians and farmer staff. In recent years we have taken on some contract lecturers because of the big growth in demand for part-time courses. We generate income on both sides. Advisory fee income in the accounts last year was €11.8 million. The figure for educational activity was about €5 million or €6 million.

Mr. Seamus McCarthy

Professor Gerry Boyle

Professor Gerry Boyle

Yes. We have a variety of charges for all courses. About 7,000 students passed through Teagasc last year in courses of different duration, both full-time and part-time. There is associated expenditure. We have large a number of staff.

I am looking at the figures and need a little help with them in order that people will be able to understand them. I am looking at page 93 which shows that the operational income of the knowledge transfer section was €18.9 million. If I turn to page 95 and look at the analysis of general operating expenses, the knowledge transfer box includes a sum of €13.6 million. Am I comparing like with like?

Professor Gerry Boyle

Professor Gerry Boyle

Just in order that we can get a feel for it. We have mentioned that the profit figure was down significantly. I recall that the operating surplus was down from approximately €8 million to €5 million. I am trying to figure out where in the divisions - operations, knowledge transfer and research - the reduction in profit occurred, as in the case of income, salaries and expenses. The figure for Teagasc is down by €3 million. Can Professor Boyle give me a headline on the divisions in which the loss occurred? The profit figure decreased from €8 million in 2016 to €5 million. Does he want to send us a schedule? He can see my obvious question. I am looking at the breakdown under these headings and know that the financial statements are right, but they do not show that information.

Professor Gerry Boyle

As I said at the beginning, normally we do not want to have a surplus. We have to hit a balanced budget on 31 December. That is normal. In recent years we have had to build up a reserve. In some years it is not possible-----

Professor Gerry Boyle

Professor Gerry Boyle

I will call it a breakdown that a non-Teagasc person could understand. I will put it that way.

The third item on page 95 is rents, rates and insurance. Where is Teagasc renting? Are there some situations where Teagasc rents premises? Is there much paid in rent? Will Professor Boyle give us a breakdown of the rents paid and the location of premises?

Professor Gerry Boyle

Professor Gerry Boyle

If one takes Moorepark as an example, we own a core amount of land surrounding the facility. It is programme-driven. We have rented land form Dairygold because we are rolling out a new programme for next generation dairy herd precision farming. We fund that activity from a variety of sources. Much of the time we generate research income that enables us to take on a new programme. That is often the driver. We are very careful about the land we rent. It is a question I ask continually when there a proposal is made. There has been none in recent years. Everything has to be programme-driven. If something makes sense, we will rent. We own most of our offices, but if there is an area where we have an office or think we need one and it makes more sense to rent rather than commit to a new build, we will rent.

I will not go into the detail, but I have noticed an unusual situation which I have not seen too often. It involves deferred income. I will try to put it simply because I have only had a quick look at it. I get the impression that if Enterprise Ireland gives Teagasc a grant of a couple of million to do a job, if Teagasc does the job, the income is recorded in that year. If Enterprise Ireland gives Teagasc €3 million and it lodges it in its bank account and has to do the work the following year, it holds it as deferred income. It does not come within current income and is recorded as income in the year Teagasc incurs the expenditure.

Professor Gerry Boyle

Mr. Seamus McCarthy

Professor Gerry Boyle

The very same happens in UCD or UCC. The programmes are multiannual. We do not get all of the money. We receive a certain amount upfront. We have to have resources to start the job and then the problem is usually at the other end because when we finish the project and invoice for it, it can take a long time to receive the balance of the moneys.

Professor Gerry Boyle

Professor Gerry Boyle

A typical research project is for a period of three to four years. The other component is that we can only commit to capital investment if the resources are in place. Therefore, with capital funds, there is about €6 million of the €20 million available where we have a commitment to build infrastructure over a period of time. The money has to be in place.

Professor Gerry Boyle

Professor Gerry Boyle

Will Professor Boyle talk to me about taxation? Teagasc made a profit of €5 million in the previous year. A figure of €8 million is also referred to. How much did Teagasc pay in corporation tax or income tax? A lot of its money comes from the Exchequer grant. I do not know if the income from it is deemed to be exempt, but Teagasc has other income.

Ms Susan Kearney

Ms Susan Kearney

Correct. There is a small element of taxation which is attributable to the subsidiary company Moorepark Technology Limited which is run on a commercial basis. The profits it generates are subject to corporation tax.

However, Teagasc has charitable status from the Revenue Commissioners and does not pay income tax. We are subject to-----

Ms Susan Kearney

-----payroll tax, VAT and so on, just not tax on profits. As has been discussed here already, however, we are not in the profit-making business in any event so it balances out over time. We do not build up surpluses and we are not subject to-----

Will Ms Kearney explain why there is a big figure in here of €110 million in deferred tax if she is telling me that Teagasc never pays tax? It is stated in note 22 on page 110 that €110 million has been provided for under "Provisions for liabilities - Deferred tax". If Teagasc is not liable for tax, why is that provision in there?

Professor Gerry Boyle

It is in note 14 on page 106. I just do not understand how the two work together. This comes under investments. On investments, I understand what Deputy Burke said, namely, that Teagasc might have a conflict of interest with shareholding in the co-operatives. I refer to the figure of €438,000. It is not major. Teagasc can always sell its shares. Let us be clear: farmers can get shares. They are entitled to sell them if they want. What I found unusual in this is the question whether it showed a bias towards the dairy industry. I do not see any shares in meat processing. I know Teagasc says it got the shares just because it was-----

Professor Gerry Boyle

Moorepark Technology Limited was set up in the early 1990s. It was a collaboration between us and the dairy industry. Not all of those in the dairy industry had joined up and were involved in the shareholding or contributed to the equity of the company at the time. In the first tranche of activity, I believe Enterprise Ireland was involved as well. In recent years, we have sought additional investment of €10 million to upgrade the facilities in light of Brexit and everything else, and Enterprise Ireland dropped out. It is not currently a shareholder.

Professor Gerry Boyle

They are most of the dairy companies, the likes of Glanbia, Dairygold, the co-operatives, Kerry Group, Tipperary Co-op, Arrabawn and, I think, Aurivo. Is Aurivo there? One or two of them are not there and I do not want to-----

Professor Gerry Boyle

It is a small amount. At the top of page 110, note 25 states, "The non-controlling interest comprises shares in Moorepark Technology Limited." I do not get how Teagasc has a 57% controlling shareholding in note 14 and then has a non-controlling interest in note 25.

Ms Susan Kearney

I will answer that question. In our consolidated statement of income and expenditure on page 80, those are the combined results for Teagasc and Moorepark Technology Limited. At the bottom of that statement it states that the surplus attributable to Teagasc is €2.28 million and that is attributable to non-controlling interest is €118,000. Note 25, to which the Chairman referred, on page 110 explains that the non-controlling interest is Moorepark Technology Limited. What this is explaining is that the amount of the surplus there that is not attributable Teagasc is attributable to Moorepark Technology Limited.

Ms Susan Kearney

Yes. We have only one subsidiary, which is Moorepark Technology Limited. The financial reporting standards require the terminology "non-controlling interest", but basically it is the amount that is not attributable to Teagasc.

Mr. Seamus McCarthy

I am nearly there now. I do not know whether I have anything else to raise. I think I am really on the last point or two. I have mentioned the deferred income, which the witnesses have explained, the taxation issue and the controlling interest. I know these relate to the accounting side.

The final issue is Johnstown Castle - the building. It is stated in note 13, under "Heritage assets", that most of the assets Teagasc lists are capitalised at original cost. There is a great amount of reserve accounting in there. Teagasc has an awful lot of assets that it does not include because they are heritage assets and Teagasc says it would be impossible to get an objective valuation of them on a comparable basis. What is included in Teagasc's assets in respect of Johnstown? Is it just the building or the land?

Professor Gerry Boyle

Professor Gerry Boyle

Mr. Tom Doherty

Johnstown comprises 950 acres of land - that is the estate - but within the estate there is about 120 acres of gardens and lakes and a castle. Part of the condition under which these were passed over to the State was that we could not use them for any other purposes, so-----

Mr. Tom Doherty

The castle was initially transferred to the State for ley agricultural purposes. We built new facilities in the 2000s and the castle became surplus to requirements. As a result, we have the castle and the gardens and we must maintain them as part of the agreement of transfer to the State. We occupy other purpose-built laboratories and offices now on the estate, as do the Department of Agriculture, Food and the Marine and the Environmental Protection Agency, and we do actively farm the balance of the land. We use it for research purposes.

Mr. Tom Doherty

Mr. Tom Doherty

I just happened to visit the castle during the summer. I had a beautiful walk in the garden, with the branches of the lovely trees hanging down over the lakes. It is fantastic. It was my first time there. The one thing that saddened me was that I went up to the castle and looked inside - as the witnesses know, one can walk right up and look in the windows - and it looked very shabby. Some of the floorboards were not in great nick. I did not even do a tour of the grounds. It would only take a couple of people to tidy it. I accept that a major renovation may be required and that is almost beyond the scope-----

Professor Gerry Boyle

Professor Gerry Boyle

Mr. Tom Doherty

We have a joint programme with the Department of Agriculture, Food and the Marine, and Fáilte Ireland has committed funds to a programme. We are renovating the castle and building a visitors' centre on the grounds. We hope to have the castle renovated and open to the public internally, obviously, as well as the grounds. We hope to have that open to the public by April 2019.

Next year. When I was there I read about the plans, but the castle looked a bit sad. I was obviously there just before the work started, and it is fantastic that it is under way. Is much of that coming out of Teagasc's resources? It is a national asset.

Mr. Tom Doherty

When the castle had been repaired and the visitors' centre developed, the arrangement is that Teagasc will enter into an operations agreement with the Irish Heritage Trust for ten years. Teagasc will pass its operation to the Irish Heritage Trust. Unfortunately, historical buildings never generate money. They consume far more money than they generate, so Teagasc has agreed to subvent it with a subsidy in the region of €300,000 per year on a sliding scale. That €300,000 in year 1 will hopefully slide to a small amount in year 10.

Professor Gerry Boyle

We have strayed a little into heritage and other matters. I did so, however, because they relate to Teagasc.

At this stage, I am on my own. All the other members have left. I thank our guests for attending. Dr. Smyth from the Department of Agriculture, Food and the Marine got off lightly, but that is the way the meeting went. It is approximately ten years since representatives from Teagasc came before us, so the committee is very happy. The only reason our guests from Teagasc are here is that, earlier in the year, the committee asked what large, State-funded organisations are out there that have not been before the committee in a while. There was no other agenda, only a matter of routine because the Committee of Public Accounts had not met Teagasc in so long. Our guests heard the tone of the questions. Compared with others, this was a non-confrontational meeting. The witnesses can take that as a good thing.

I thank everyone from Teagasc and the Department of Agriculture, Food and the Marine and the Comptroller and Attorney General and his staff for attending.

The witnesses withdrew.

The committee adjourned at 1.30 p.m. until 9 a.m. on Thursday, 11 October 2018.

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